Update: The user interface for Google Reader has been revamped for iPhone users. The new UI includes tabs for All Items, Feeds and Tags. You can choose to view all your feeds or pick which items for folders you want shown. You can even view feeds for just one item at a time. Another new feature is the ability to star feed stories and mark all items in a group as read.

You can now also add new subscriptions from the iPhone. Tap on Add Subscription and enter a search term so Google Reader can find feeds about that term. There are also some prepacked feed bundles you can use to get started such as News, Sports, Fun, Thinkers, Celebrities, Geeky, Food, Technology and Cars.

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